The Men Who Loved Trains: The Story of Men Who Battled Greed to Save an Ailing Industry

27. In the Betrayal Suite

27 In the Betrayal Suite Six days later, David Goode tried to increase the pressure by firing up further the issue of market dominance, sending a letter to shippers opposing a CSX-Conrail monopoly, and declaring that Norfolk Southern, as winning bidder, would sell off duplicating lines so that places like the Port of New York would have balanced competition. He argued that the region would be best served by two railroads of fairly equal size instead of having one that had 70 percent of the tracks and another with only 30 percent. Norfolk’s argument was embarrassing to Conrail because in the previous year in the UP merger case it had argued that rail customers needed balanced competition. Now Conrail had returned to its original stance, maintaining there was no need for two railroads. Admitted one vice president, “We were flip-flopping.” Nevertheless , trying to counter NS’s spin, CSX put out a press release dismissing Norfolk Southern’s letter as an “act of desperation.” It added that Norfolk was following “a loser’s strategy, solely intent on gaining or forcing competitive concessions.” Mark Aron, by now CSX’s executive vice president for law and public affairs, told a reporter that NS had given up on bidding and was now posturing for a battle before the Surf Board. 313 In the Betrayal Suite Meanwhile, for all CSX’s rhetoric, Snow remained convinced they were headed for trouble if LeVan got his way. Snow kept telling his cohorts in Richmond that the shippers would react and the Surf Board would never permit CSX to take that much of Conrail, and now NS was driving up the price. “There really was a mentality where a bidding war would be a catastrophe,” said Aron. Yet apparently Snow did not press the issue with LeVan, who continued to think the CSX chairman was content to keep Conrail in one piece. To outsiders, especially the railroad leaders in the West, the three eastern roads were heading into a battle that could weaken all three and thereby injure the industry as a whole, and at least one was sending that message to Snow, who heard it clearly. He complained to his own directors that Conrail must be more pragmatic , warning, “If we don’t make a deal with Norfolk Southern, we’ll get everybody lined up against us.” Snow could not help but compare himself with LeVan, thereby further demarcating their differences. He noted that he had just finished a term as president of the Business Round Table, probably the most prestigious post a CEO could hold, while LeVan had been head of Conrail only two years. Snow decided the man was too inexperienced, later telling a reporter that LeVan was “politically unsophisticated.” Deep down Goode and Snow both believed they could come to a deal if left to themselves, even though neither really trusted the other. To set things in motion one needed to call the other, but who put in the first call is a mystery, for each side has insisted that the other made the initial overture. Based on all the evidence, including interviews with well-placed sources and documents, this is what happened: Linda Morgan, who was chairman of the Surface Transportation Board, had been concerned about the merger proposal since Snow and LeVan announced their deal. She was in a unique position . At the turn of the twentieth century, a man by the same family name, John Pierpont Morgan, had to a great degree enforced peace among railroads. But now the government held that power, and Linda Morgan suddenly found herself in the role of a poor man’s J. P. Morgan. Like other regulatory bodies in Washington, the Surf Board is not part of the judicial system. Thus its actions, such as its deci- 314 The Men Who Loved Trains sions to award BNSF trackage rights, do not create legal precedents . It also must endure various pressures from shippers—whose interests it is supposed to protect—and from Congress, the White House, and various other agencies while trying to sustain a stable, orderly industry. Many people outside the Washington Beltway are unaware of the nuances, and Snow and Aron soon concluded that LeVan and his advisors seemed to be among that group. The irony was they were following the advice of a seasoned Washington lawyer named Paul Cunningham whom they had retained. Cunningham believed fervently...